Asian FX subdued

May 08, 2017

Most Asian currencies edged lower on Friday as fresh falls in commodity prices raised concerns about the health of the global economy.

Chinese iron ore futures plunged to their lowest since January, extending this week’s losses and dragging steel down as well, with investors liquidating long positions amid growing worries about slowing construction and infrastructure demand.

In other commodities, oil slumped to five-month lows on Thursday amid record trading volume in Brent crude, as Organization of the Petroleum Exporting Countries (OPEC) and other producers appeared to rule out deeper supply cuts to reduce the
world’s persistent glut of crude.

Markets also remained cautious ahead of US government payrolls report expected later in the day, following March’s underwhelming 98,000 figure. Economists on average expect 185,000 jobs were created in April.

Attention will also be on Fed officials including Fed Chair Janet Yellen and Vice Chair Stanley Fischer, who are due to speak on Friday.

“Any indication of wage pressure, coupled with speeches from Yellen, Fischer, Williams, Rosengren, Evans and Bullard would keep market players on their toes going into the weekend,” OCBC Bank said in a note.

The Malaysian ringgit was among the big decliners, weakening 0.2 percent against the dollar as government data showed that annual export growth in March slowed slightly from the previous month.

Exports in March rose 24.1 percent from a year earlier, beating economists’ forecast of a 19.2 percent rise, but were down slightly from the 26.5 percent increase in February.

“The exports reflect the impact of higher commodity prices previously. From a forward looking perspective, it’s the outlook for those prices that matters. The sharp decline in energy prices has likely weakened sentiment on the ringgit in the short term,”

said Tariq Ali, investment strategist at Standard Chartered Bank.

Bucking the trend, the Japanese yen gained 0.2 percent against the dollar.

Japan’s finance ministry has proposed to launch bilateral foreign exchange swap arrangements of up to 40 billion dollars with Southeast Asian nations to enable Tokyo to provide yen funds to these countries during times of financial crisis. – Reuters

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